Louisiana cuts physicians' Medicaid payments

Louisiana will be paying less to physician practices and hospitals for treating most Medicaid patients as a result of emergency reductions taken by the state government early in August.

As part of a declaration of emergency issued Aug. 4, the Louisiana Dept. of Health and Hospitals announced reduced payments to physicians of about $19 million, and to hospitals of about $40.5 million, over the next fiscal year.

Doctors who care for Medicaid patients younger than 16 will not see payment reductions for those services. But physicians who provide certain services to older patients will take about a 10% reduction for that care, DHH said.

Louisiana implemented these cost-containment measures as part of an effort to reduce total spending by about $240 million. Earlier this year, the state revealed it would have $1.2 billion less in Medicaid revenues for fiscal 2010, which began July 1.

"Louisiana is facing an extraordinary problem that is unparalleled in history -- the largest reduction in our federal match to Medicaid that any state has ever faced," said Alan Levine, the DHH secretary.

Because the state received a large amount of federal funding to help with reconstruction efforts after Hurricane Katrina, the state's per capita income jumped by 42% from 2005 to 2007. As a result, it is now facing a "cataclysmic drop" in federal Medicaid funds, Levine explained, that is going to cost the state about $700 million over the next year. In addition, $368 million in federal stimulus assistance is set to expire in December 2010.

"There is no way for our state to cut at the margins to handle that type of federal reduction," Levine said.

Physicians fearful

Physicians and the state medical society have been closely monitoring the situation. They are concerned about how the cuts will affect doctors with low-income and disabled patients.

"It would discourage us from taking any patient with Medicaid," said William LaCorte, MD, an internist who treats about 400 nursing home patients in the greater New Orleans area.

Dr. LaCorte said the cuts could start affecting staffing, as the loss in money for his practice would be just about equal to the salary of a nurse practitioner. "I think it disproportionately affects poorer areas and nursing home residents."

The DHH's Levine explained that the state is doing the best it can in attempting to fix budget shortfalls that have been partly the result of damaging natural disasters.

"Some physicians are going to face a reduction," he said. "This is not ideal. We're not happy about this, and this is not what we want to do, but we're facing some harsh realities here. Being disciplined and planning is the best thing we can do right now."

The state also is looking to rein in Medicaid payments for what Levine describes as avoidable hospitalizations, and it is starting a new disease management initiative Jan. 1, 2010, for patients with asthma, heart disease and diabetes. He is hopeful that this will help reduce unnecessary trips to the state's emergency departments and control health system costs.

Lower payments to hospitals and physicians accounted for two-thirds of the total DHH reductions detailed in the emergency announcement.

Rural areas impacted

The federal government has been paying for 72% of Louisiana's Medicaid program. But by 2011, that share will shrink to 63%, because the federal government is counting hurricane relief funds as income.

The decrease is likely to cause physicians to stop taking new Medicaid patients or halt Medicaid services to adult patients entirely, according to the Louisiana State Medical Society.

"This could occur in a very insidious way," said Vincent A. Culotta Jr., MD, chair of the society's council on legislation. "When one doctor stops, others in the community will become overburdened, and they will stop because they'll realize they're not making money and can't provide the service."

Dr. Culotta said his society has worked hard with the DHH and the federal government on reducing health system costs while at the same time ensuring that patients have access to the care they need. But he said the upcoming cuts will go much too deep.

"We have one of the largest Medicaid patient populations in the country right now," he said. "This will ripple through the rural hospitals and providers, as well as the metropolitan areas. Many of our physicians will work hard to provide care, but when it costs $12 to provide care and then they get reimbursed $10, they just can't do it forever."

While New Orleans and other metropolitan parts of the state also will be impacted, Dr. Culotta predicts that patients in rural areas will feel the greatest impact. "It's going to be harder in those areas, because there may not be a nearby local emergency room, and the patient may have to travel longer distances and therefore not go until it's much more critical and the expense to care is greater."